The financial literacy industrial complex(axios.com)
axios.com
The financial literacy industrial complex
https://www.axios.com/financial-literacy-industrial-complex-61711aa9-7eea-4b26-b684-03719387a0cb.html
142 comments
> Nobody is paying attention and actively prides themselves in not learning and never reading a book in their lives, that's the problem.
If we had a more meritocratic society, I doubt people would pride themselves in their ignorance.
But as it stands, our society rewards both luck and misfortune - and we privatize gains and socialize losses.
Combine that with the fact that access corruption is rampant in Western societies - and the way to succeed is to take excessive risk, woo gatekeepers, execute, and get lucky.
Only one of those requires the type of intelligence you get in school (execution). And if you have enough luck or corruption, you don't even need to execute.
Why do the hard work on trying to find cures for common forms of cancer, make breakthroughs toward fusion energy, or increase crop yields on staple crops - when you can take on excessive risk in property speculation and your odds of financial success are many times higher?
I'm a strong believer that the world is getting better every day - even in recent times. But I'm not sure how much longer that trend will last in a world that gives smart people very few incentives to do things that actually benefit society.
Maybe with enough people we're destined to get lucky and progress no matter what.
If we had a more meritocratic society, I doubt people would pride themselves in their ignorance.
But as it stands, our society rewards both luck and misfortune - and we privatize gains and socialize losses.
Combine that with the fact that access corruption is rampant in Western societies - and the way to succeed is to take excessive risk, woo gatekeepers, execute, and get lucky.
Only one of those requires the type of intelligence you get in school (execution). And if you have enough luck or corruption, you don't even need to execute.
Why do the hard work on trying to find cures for common forms of cancer, make breakthroughs toward fusion energy, or increase crop yields on staple crops - when you can take on excessive risk in property speculation and your odds of financial success are many times higher?
I'm a strong believer that the world is getting better every day - even in recent times. But I'm not sure how much longer that trend will last in a world that gives smart people very few incentives to do things that actually benefit society.
Maybe with enough people we're destined to get lucky and progress no matter what.
Real-world success is generally a matter of luck no matter what the incentives are. You can't make your cancer research pan out, you can only do it diligently and find out later if it was the right direction. You can definitely screw it up. But you can't make it work without a bit of luck.
If people can't keep their luck-based gains, no one has any real reason to try anything unusual. Everyone would be chasing the puck instead of skating to the open ice hoping to catch a break. Society would stagnate.
If people can't keep their luck-based gains, no one has any real reason to try anything unusual. Everyone would be chasing the puck instead of skating to the open ice hoping to catch a break. Society would stagnate.
Things look much more predictable and fair if you adjust your definition of success a little bit. A modest life with reasonable stability and time for some recreation and vacations is within reach for a large fraction of people (in Norcal - don't know about elsewhere) with some hard work and financial restraint. This feels like success to me.
> you can't make it work without a bit of luck.
You won't get any luck if you don't try.
Working to put yourself into a situation where luck can find you will greatly increase your luck.
You won't get any luck if you don't try.
Working to put yourself into a situation where luck can find you will greatly increase your luck.
Re: luck, from my father, "It's amazing how lucky well-prepared people are."
I guess if you can only imagine a society structured like it is today.
If we all accepted that luck is the driving force, decided that we would rather live in a world where hard work and intelligence pays off - then it's possible to imagine a world in which you're rewarded for hard work (on areas of importance) and gains are socialized instead of losses. The socialized gains could pay people who worked hard and their ideas didn't pan out.
I'm not saying this is a world that would work and is better.
But it's pretty unimaginative to think it's just flat out impossible to have progress in any society that isn't structured around luck.
If we all accepted that luck is the driving force, decided that we would rather live in a world where hard work and intelligence pays off - then it's possible to imagine a world in which you're rewarded for hard work (on areas of importance) and gains are socialized instead of losses. The socialized gains could pay people who worked hard and their ideas didn't pan out.
I'm not saying this is a world that would work and is better.
But it's pretty unimaginative to think it's just flat out impossible to have progress in any society that isn't structured around luck.
Intelligent people tried central planning and it didn’t work. Repeatedly.
If you are going to propose banging our head into that wall again you can’t just naively point out how great it sounds from first principles. Been there, done that. Instead you need to seriously grapple with those failures and convincingly explain why this time will be different.
If you are going to propose banging our head into that wall again you can’t just naively point out how great it sounds from first principles. Been there, done that. Instead you need to seriously grapple with those failures and convincingly explain why this time will be different.
Seems to be working well for Walmart. A major problem with central planning is timely flow of accurate information. Although this is still a problem, it has become much easier to do so than in the past.
Do not confuse forms of governance intended for whole societies with those that work for smaller, more controlled and more selective organizations.
Walmart cannot be compared to the USA or China for sure, but your criticism is a little pedantic and presumptuous. There are national economies that are in the same order of magnitude as, or smaller than, that of Walmart's.
As context, if my numbers are right, then at ~$550B annual revenue Walmart would be around the GDP of Belgium and Thailand.
Or about the 25th largest economy in the world, if looking at it that way.
And it's a better corporate analogy than most, considering it essentially does everything from retail to services.
Or about the 25th largest economy in the world, if looking at it that way.
And it's a better corporate analogy than most, considering it essentially does everything from retail to services.
And it’s failing again! Interest rate interventionism has been slowly eroding social and economic mobility in the west for 30 years!
Why is decentralized planning impossible? Why can't areas of importance be picked by democratic vote?
It seems like a possible option.
It seems like a possible option.
I think the hard part of that is socializing the definition of "areas of importance"
Also getting everyone to accept one worldview. Maybe the most important area of importance would be educating people to see things the way you see...
Also getting everyone to accept one worldview. Maybe the most important area of importance would be educating people to see things the way you see...
I am all for it as long as I can decide what is important!
I don't think that type of corruption is most prevalent in Western societies.
> Combine that with the fact that access corruption is rampant in Western societies - and the way to succeed is to take excessive risk, woo gatekeepers, execute, and get lucky.
Can you name one country in the world where it is not true?
Can you name one country in the world where it is not true?
Luck sort of rewards itself, it is a part of its very definition.
But I would not be so hostile to luck. We need it. The Lord of the Rings would never exist if Tolkien wasn't lucky enough to come down with a trench foot and thus survive the Great War. mRNA vaccines might not exist if Katalin Karikó did not beat that cancer in the late 1990s. Etc.
But I would not be so hostile to luck. We need it. The Lord of the Rings would never exist if Tolkien wasn't lucky enough to come down with a trench foot and thus survive the Great War. mRNA vaccines might not exist if Katalin Karikó did not beat that cancer in the late 1990s. Etc.
The reason we don't have a meritocracy society is because failure is being rewarded.
Cut the welfare, stop punishing success with higher taxes and you'll see just how much better people can be.
Cut the welfare, stop punishing success with higher taxes and you'll see just how much better people can be.
Small fry compared to banks and companies being bailed out by the government.
That would be great for society but awful for it's citizens.
Failure is not being rewarded, being a member of sociery is, it's not about performance.
Failure is not being rewarded, being a member of sociery is, it's not about performance.
Failure is being rewarded with free services, lower taxes and a whole bunch of other benefits, this isnt really in question here.
Dollar for dollar poor people pay 1 sixth of the income taxes that high income earners pay. If that's not rewarding failure, what is?
Dollar for dollar poor people pay 1 sixth of the income taxes that high income earners pay. If that's not rewarding failure, what is?
You put an equal sign between failure and low income, which in my mind is quite baffling. You could be a failure and pay a lot of taxes too.
But it's not uncommon, we do it with our kids all the time. "If you don't perform good grades, you are not good enough". My point being that changing that view to, "look at what opportunities you (will) have now". Someone being a failure according to you may be quite demotivated at reaching a high income due to the fact that it seems impossible, why do the effort? For what is more important than playing a role in society, and be a good human? Is really income a value of how human you are?
But it's not uncommon, we do it with our kids all the time. "If you don't perform good grades, you are not good enough". My point being that changing that view to, "look at what opportunities you (will) have now". Someone being a failure according to you may be quite demotivated at reaching a high income due to the fact that it seems impossible, why do the effort? For what is more important than playing a role in society, and be a good human? Is really income a value of how human you are?
You're assuming market prices for labor aren't artificially low because the system works against them.
You're also assuming high incomes are completely independent of Central Banks subsidizing asset prices.
You're also assuming high incomes are completely independent of Central Banks subsidizing asset prices.
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>not learning and never reading a book in their lives,
Maybe because the education system isn't devised to educate but to babysit?
Maybe because the education system isn't devised to educate but to babysit?
Or maybe because when you start to educate someone, they throw a textbook at another student and they have to interrupt the class to deal with disciplinary measures and EMTs. At that point, sure it becomes babysitting for the rest of the students.
Education for humans was never meant to be done on a classwide level. That's why it sucks.
OK. So you're educated about finance.
But personal finance is mostly about personal habits and actions. You can understand what is a financially sound plan of action all you want. For example, I wasted money on eating out three times last week, whereas previously I only eat out once per week successfully for weeks on end.
Information is insufficient. Practice is required.
I am unsure exactly what information these firms provided. Even if it's sound information, it doesn't necessary translate to practice.
But personal finance is mostly about personal habits and actions. You can understand what is a financially sound plan of action all you want. For example, I wasted money on eating out three times last week, whereas previously I only eat out once per week successfully for weeks on end.
Information is insufficient. Practice is required.
I am unsure exactly what information these firms provided. Even if it's sound information, it doesn't necessary translate to practice.
That's literally what my personal finance class taught in high school as a part of the government mandated financial literacy class.
How to budget. Why to budget. How to write a check. What is a bank account? How to open a bank account. What food costs. What does produce cost? Compare that to X restaurant. What are good ways to save money? What are the costs of renting vs owning, etc.
This wasn't a "stock market" class, though they briefly covered business and what a stock/investing was.
How to budget. Why to budget. How to write a check. What is a bank account? How to open a bank account. What food costs. What does produce cost? Compare that to X restaurant. What are good ways to save money? What are the costs of renting vs owning, etc.
This wasn't a "stock market" class, though they briefly covered business and what a stock/investing was.
They are useful information. For a lot of people, that's great.
But it is not the same thing as practice, as in actually doing the work of saving and resisting temptation such as eating out.
But it is not the same thing as practice, as in actually doing the work of saving and resisting temptation such as eating out.
But it is a prerequisite.
Okay I understand what you're saying, but I'm not sure why this is being used as an argument against teaching personal finance...
Academic vs. real life is a strange debate to me. It seems that to some people that academics itself is sacrosanct and plenty, and to others real life is sacrosanct and plenty. This entire article is about academic data being sacrosanct about these classes, and that's literally what I railed against. To me, I believe in both. They go hand in hand.
So for instance, if you're talking about the action of cooking, I also was required to take a Home Ec class independently of the personal finance requirement. There are many requirements in a high school, this is just one class we are talking about. The Home Ec class had grades based on how well we would sew up and patch clothing, create pillows and such, and cook various things. So there's some practical experience.
Now, you're also debating about an essentially real world "resisting" of urges and that's clearly not going to be able to be "taught" as you say. But we're talking about preparing children for adulthood, and in adulthood, you're going to experience that either way.
If they don't know what the term "interest rate" is, how exactly are they going to learn it from a 10+ page credit card legalese document? That seems enormously more opaque to me. You can learn it from others, sure, but they had to learn it somewhere and they likely learned it from a book or from school, or from learning it by screwing up the hard way.
If we're trying to reduce the amount of people that long term screw up, then having them equipped to understand the language of the real world is a great place to start instead of at the ground floor with zero knowledge. And yes, real world experience is necessary, too, but short of giving kids raw eggs and meat and having thousands of stoves in the lunchroom instead of prepared food I'm not sure how you would accomplish that.
Some people are privileged enough to have parents that can teach them this stuff, but largely after generations of not knowing these things in impoverished areas or having parents that have to work to do the things like cook for their children and pay their own bills when they get home, those fresh "graduates" are going to start from scratch not knowing the language nor having the experience and wind up screwing up, possibly in a way that is impossible to get out of and end up homeless or buried in extreme debt with interest rates they do not understand. Increasing the odds of your success by helping you understand the terms being thrown at you is going to help prevent that. As is having you go through the motions of doing the cooking, in this example.
But it comes down to for me as I said, I believe in real world experience AND education on a subject. Education can teach you what you need to practice in the first place sometimes, rather than end up unable to understand why you are trapped and what could potentially help you become untrapped. I don't see these as mutually exclusive.
Academic vs. real life is a strange debate to me. It seems that to some people that academics itself is sacrosanct and plenty, and to others real life is sacrosanct and plenty. This entire article is about academic data being sacrosanct about these classes, and that's literally what I railed against. To me, I believe in both. They go hand in hand.
So for instance, if you're talking about the action of cooking, I also was required to take a Home Ec class independently of the personal finance requirement. There are many requirements in a high school, this is just one class we are talking about. The Home Ec class had grades based on how well we would sew up and patch clothing, create pillows and such, and cook various things. So there's some practical experience.
Now, you're also debating about an essentially real world "resisting" of urges and that's clearly not going to be able to be "taught" as you say. But we're talking about preparing children for adulthood, and in adulthood, you're going to experience that either way.
If they don't know what the term "interest rate" is, how exactly are they going to learn it from a 10+ page credit card legalese document? That seems enormously more opaque to me. You can learn it from others, sure, but they had to learn it somewhere and they likely learned it from a book or from school, or from learning it by screwing up the hard way.
If we're trying to reduce the amount of people that long term screw up, then having them equipped to understand the language of the real world is a great place to start instead of at the ground floor with zero knowledge. And yes, real world experience is necessary, too, but short of giving kids raw eggs and meat and having thousands of stoves in the lunchroom instead of prepared food I'm not sure how you would accomplish that.
Some people are privileged enough to have parents that can teach them this stuff, but largely after generations of not knowing these things in impoverished areas or having parents that have to work to do the things like cook for their children and pay their own bills when they get home, those fresh "graduates" are going to start from scratch not knowing the language nor having the experience and wind up screwing up, possibly in a way that is impossible to get out of and end up homeless or buried in extreme debt with interest rates they do not understand. Increasing the odds of your success by helping you understand the terms being thrown at you is going to help prevent that. As is having you go through the motions of doing the cooking, in this example.
But it comes down to for me as I said, I believe in real world experience AND education on a subject. Education can teach you what you need to practice in the first place sometimes, rather than end up unable to understand why you are trapped and what could potentially help you become untrapped. I don't see these as mutually exclusive.
Will people do a better job of saving money and resisting temptation if we never teach them why that's important?
> I wasted money on eating out three times last week
Was it definitely a waste? The time you spend preparing your own food has value. As does the mental impact of (depending what you bought) the pleasure of a meal you could not have made for yourself; and the relief of pressure of not having to do it yourself.
Was it definitely a waste? The time you spend preparing your own food has value. As does the mental impact of (depending what you bought) the pleasure of a meal you could not have made for yourself; and the relief of pressure of not having to do it yourself.
It is worth trying, though. Some people find out that cooking gives them more pleasure than waiting for their order to arrive.
Yes, this is called “people who enjoy cooking”.
True, but in order to find out if that is your case, you must try it out, and probably more than once.
Most hobbies aren't immediately awesome, a certain section of the learning curve must be climbed.
I still remember my silent desperation when I sat in front of a PC back in 1994 for the first time. Computers were totally alien to me at that time. Ten years later I was programming in several languages.
Most hobbies aren't immediately awesome, a certain section of the learning curve must be climbed.
I still remember my silent desperation when I sat in front of a PC back in 1994 for the first time. Computers were totally alien to me at that time. Ten years later I was programming in several languages.
Personally, I enjoy both, equally, at different times.
> personal finance is mostly about personal habits and actions
It’s also about common knowledge and frameworks.
Knowing you should not have to pay to maintain a checking account, for instance. Or that filing a tax return can produce a refund. How to pay down debt when you have spare cash and different types of debt, or how to compare two purchasing options—a monthly or an up front.
It’s also about common knowledge and frameworks.
Knowing you should not have to pay to maintain a checking account, for instance. Or that filing a tax return can produce a refund. How to pay down debt when you have spare cash and different types of debt, or how to compare two purchasing options—a monthly or an up front.
> That doesn't mean it "doesn't work"
If our education fails to teach, then our education has failed.
If our education fails to teach, then our education has failed.
People know they shouldn’t carry credit card debt. They just want stuff too much.
That’s not an education problem as they know they shouldn’t do that.
That’s not an education problem as they know they shouldn’t do that.
This is reductionist to the point of uselessness. People "know" tons of crap, and singular known facts don't dictate behavior by themselves, no matter who you are. Every tradeoff you make is a result of all your collected experience and knowledge on the topic as well as your desires and the complexities of time-based decision making (bad now = good later, and vice versa, where the "bad" and "good" things are never quite comparable qualitatively).
Education affects humans, and education can be changed to better affect humans, but humans can't simply be changed except by education, so it's the ultimate irony to look at people doing a bad job, their fault or not, and imply we somehow can't or shouldn't use the one and only tool we have to change people. Giving up is easy, especially if it's strangers you're giving up on and you don't care about the entire picture of the society you live in. Bettering education is very hard. Taken together, it's obvious why so many people just want to say "they deserve it" and no longer think about it.
Education affects humans, and education can be changed to better affect humans, but humans can't simply be changed except by education, so it's the ultimate irony to look at people doing a bad job, their fault or not, and imply we somehow can't or shouldn't use the one and only tool we have to change people. Giving up is easy, especially if it's strangers you're giving up on and you don't care about the entire picture of the society you live in. Bettering education is very hard. Taken together, it's obvious why so many people just want to say "they deserve it" and no longer think about it.
> If our education fails to teach, then our education has failed.
Or education was not the solution?
Or education was not the solution?
Education is a kind of solution but effectiveness is also a factor. I went through D.A.R.E and a whole host of other health and mindfulness classes. Just because you educated someone doesn’t mean they’re going to become immune to what you’re trying to teach them to avoid. Drugs, crime, and overeating are always going to be issues no matter how much “education” you throw at young people.
My point exactly, the focus on education is likely misplaced.
Sure, personal responsibility is not without importance.
But we don't solve obesity or poverty through education. We all know to eat healthy and exercise.
Making the right choices easier often has a bigger effect.
Sure, personal responsibility is not without importance.
But we don't solve obesity or poverty through education. We all know to eat healthy and exercise.
Making the right choices easier often has a bigger effect.
So if your explanation is right, then we should also expect to see only a tiny effect in the practical use of math, reading, writing, etc. between people who went to school and people who didn't. Because only 2 cared enough to pay attention. Right?
Beyond the really elementary things that get repeated often enough and insistently enough for most people to learn them whether they're interested or not -- basic reading, basic writing, addition and subtraction -- yes, as far as I can tell most people don't retain much from school. Not for long, anyway. It's easy to think otherwise if you're (for example) an engineer surrounded by unusually studious people in your day-to-day life, but standardized tests administered more broadly give a less encouraging picture.
Sometimes it's not a retention problem, it's that they never learned the stuff in the first place. You're pretty doomed if you fall behind in school, it's all up to some individual going above and beyond (a teacher, a family member, a friend) to save you, because the system will just keep shuffling you along to adulthood, and then all the consequences hit at once. Take this loan with compound interest you can't understand because you can't multiply, buy a massive depreciating asset with it (car, mobile home...) because you don't know what "depreciating" is...
https://en.wikipedia.org/wiki/The_Case_Against_Education looks at research on retention and finds it to support you on this point.
I’m guessing you had great parents?
This is an amazingly narcissistic viewpoint:
1. You are part of the blessed 5% (how do you know?)
2. Anyone who disagrees is actively malicious (it's not all about you, man)
3. It worked for you, therefore it must work for everyone (if only they were as awesome as you, right?)
I would avoid anyone that named themselves kafkaincarnate. That's just terrifying.
On a side note, my favorite kafka story out of all his saved works was, the blind paranoid mole digging tunnels. I'm a big fan of kafka but would never want to align my brain with his tragic way of thinking. But he was not wrong to be paranoid, he lived a pretty terrible life in a pretty terrible time.
On a side note, my favorite kafka story out of all his saved works was, the blind paranoid mole digging tunnels. I'm a big fan of kafka but would never want to align my brain with his tragic way of thinking. But he was not wrong to be paranoid, he lived a pretty terrible life in a pretty terrible time.
This is essentially the common fallacy along the lines of "Everybody deserves what they get and gets what they deserve". Society can't, and indeed does not, work that way.
I agree, this article was worse than crap. its dangerous
As I understand it, selection effects are pervasive in education. It’s a lot easier to show good results if you can choose to teach only the smart kids.
So, on the one hand, teaching only two kids in a class of 40 is too easy. On the other, sometimes nothing seems to work because studies don’t account for inherent differences in aptitude.
So, on the one hand, teaching only two kids in a class of 40 is too easy. On the other, sometimes nothing seems to work because studies don’t account for inherent differences in aptitude.
Have you found any resources that are helpful, high quality, free, and sane?
Yes.
The r/personalfinance wiki on subreddit has some great starter content in a wiki[1] that's not a content marketing funnel into any product/service.
For investing-specific content, bogleheads also has a pretty awesome wiki [2] (though somewhat ideological, given that it's mainly around the "Bogle" philosophy).
These wikis are great because they're neutral (nothing to sell you) and also aggregated from thousands upon thousands of questions/answers/advice in each respective community.
(I work on a startup in this space and while we build a product, not content, we've basically read everything else out there).
[1] https://www.reddit.com/r/personalfinance/wiki/index/
[2] https://www.bogleheads.org/wiki/Main_Page
The r/personalfinance wiki on subreddit has some great starter content in a wiki[1] that's not a content marketing funnel into any product/service.
For investing-specific content, bogleheads also has a pretty awesome wiki [2] (though somewhat ideological, given that it's mainly around the "Bogle" philosophy).
These wikis are great because they're neutral (nothing to sell you) and also aggregated from thousands upon thousands of questions/answers/advice in each respective community.
(I work on a startup in this space and while we build a product, not content, we've basically read everything else out there).
[1] https://www.reddit.com/r/personalfinance/wiki/index/
[2] https://www.bogleheads.org/wiki/Main_Page
I second the recommendation of the /r/personalfinance wiki. In particular, their FAQ answer to "I have $X, what do I do with it?" is a concise, simple-to-follow basic blueprint for handling money that should work well for most people:
https://www.reddit.com/r/personalfinance/wiki/commontopics
https://www.reddit.com/r/personalfinance/wiki/commontopics
The flowchart version of that "what do I do with it?" is pretty awesome https://m.imgur.com/lSoUQr2
The only major point of the flowchart that I disagree with is the part about paying off mid to low interest debt.
I suppose that is where the "personal" part of personal finance comes into to play.
For example, a person will post something like, "Should I pay off my $50k student loans at 4%-6% as fast as possible, or should invest more?"
Common responses include:
1. "Would you take out a $50k loan at 4%-6% to invest?"
2. "Paying off your loans is a guaranteed 4%-6% return."
The problem I have with this advice is that in the case of response #1, that is somewhat of a false equivalence. Also, I am not sure outside of a HELOC where one could even get a $50k loan for 4%-6%. Even in this environment currently, I see banks advertising their low interest loans which clock in around 8%-12%. (I'm not counting margin loan rates in this example).
As for #2, I feel like this advice is okay at face value, but tends to fall apart once one takes more factors into account. One such factor people often miss is that one must use post-tax income to pay off student loans. Thus, in the US, assuming the person asking for advice has any income at all, then he or she must pay 10% <= x <= 37% in taxes to pay a 4%-6% loan, thus it's a guaranteed loss of 10% to 37% to get a guaranteed return of 4%-6%.
I'm not trying to downplay the powerful psychological aspect of paying off debt, but I do think more people should consider the mathematically optimal option as well (making the minimum payments on debt while maxing out tax advantaged savings before making additional payments on debt).
After all, time is the most important factor in the compounding returns/interest formula, and one can make more money but not more time. Plus, inflation slowly chips away at loans just as much as savings.
I suppose that is where the "personal" part of personal finance comes into to play.
For example, a person will post something like, "Should I pay off my $50k student loans at 4%-6% as fast as possible, or should invest more?"
Common responses include:
1. "Would you take out a $50k loan at 4%-6% to invest?"
2. "Paying off your loans is a guaranteed 4%-6% return."
The problem I have with this advice is that in the case of response #1, that is somewhat of a false equivalence. Also, I am not sure outside of a HELOC where one could even get a $50k loan for 4%-6%. Even in this environment currently, I see banks advertising their low interest loans which clock in around 8%-12%. (I'm not counting margin loan rates in this example).
As for #2, I feel like this advice is okay at face value, but tends to fall apart once one takes more factors into account. One such factor people often miss is that one must use post-tax income to pay off student loans. Thus, in the US, assuming the person asking for advice has any income at all, then he or she must pay 10% <= x <= 37% in taxes to pay a 4%-6% loan, thus it's a guaranteed loss of 10% to 37% to get a guaranteed return of 4%-6%.
I'm not trying to downplay the powerful psychological aspect of paying off debt, but I do think more people should consider the mathematically optimal option as well (making the minimum payments on debt while maxing out tax advantaged savings before making additional payments on debt).
After all, time is the most important factor in the compounding returns/interest formula, and one can make more money but not more time. Plus, inflation slowly chips away at loans just as much as savings.
IKBR will lend to you at 2.5ish% on margin
https://www.interactivebrokers.com/en/index.php?f=46376
https://www.interactivebrokers.com/en/index.php?f=46376
I see that thrown around a lot, but I can't bring myself to do it.
I believe that using margin loans properly requires a lot of knowledge and some strokes of luck. I've seen people get burned and some people do well with margin.
It's one of those things to me where it makes sense to use margin loans, but only if I have a high enough balance to support it. But if I have a high enough balance to survive a margin call, then I probably wouldn't need the margin in the first place, except if I were trying to invest the margin on top of what I already have, which I wouldn't be doing in most cases.
I believe that using margin loans properly requires a lot of knowledge and some strokes of luck. I've seen people get burned and some people do well with margin.
It's one of those things to me where it makes sense to use margin loans, but only if I have a high enough balance to support it. But if I have a high enough balance to survive a margin call, then I probably wouldn't need the margin in the first place, except if I were trying to invest the margin on top of what I already have, which I wouldn't be doing in most cases.
Checking out a copy of 'the intelligent investor' from your local library would fit all three criteria you mentioned. Buying at least one share of Berkshire Hathaway comes with a lifetime subscription to Warren Buffet's shareholder letters, not quite free but certainly good value for money.
But in general, I think the issue is that basic financial competence doesn't require a very sophisticated model, it just requires the emotional intelligence and self-discipline to stick to a robust one. That probably can be taught, but not a lot of schools exist for it.
But in general, I think the issue is that basic financial competence doesn't require a very sophisticated model, it just requires the emotional intelligence and self-discipline to stick to a robust one. That probably can be taught, but not a lot of schools exist for it.
Links to Berkshire Hathaway's letters to shareholders from 1977 through 2020 are available at, https://www.berkshirehathaway.com/letters/letters.html
The basic form of financial literacy that is unbelievable to me that people still need to be told this:
>Income should always exceed expenses; work to minimize expenses and maximize income.
>You should always be saving money. A fool and their money are soon to part.
>Time = money. The purpose is to maximize both.
>Loans are assets and must be paid back plus interest.
The last step, learn double entry accounting and manage your budget tracking everything. If you don't even do that, you aren't even aware of what you blow your money on to know where to start.
>Income should always exceed expenses; work to minimize expenses and maximize income.
>You should always be saving money. A fool and their money are soon to part.
>Time = money. The purpose is to maximize both.
>Loans are assets and must be paid back plus interest.
The last step, learn double entry accounting and manage your budget tracking everything. If you don't even do that, you aren't even aware of what you blow your money on to know where to start.
Loans are not assets, they are liabilities.
In double entry accounting, when you receive a loan, you increase liabilities and assets. You don't just increase liabilities.
When you take out a loan, you receive cash. That cash increases your assets, while the loan increases your liabilities (such that your equity does not change - until you have to pay interest.).
(Though, notably, for a bank the client deposits are liabilities, and the loans to clients are assets, indeed.)
(Though, notably, for a bank the client deposits are liabilities, and the loans to clients are assets, indeed.)
Of which none of what you said contradicts what I said...
A loan is a liability, not an asset (for a non-bank).
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Bogleheads.org is a great source of information too. Though, the site and forum users are strong believers in a particular investment strategy, many have great finical advice for the common man too.
There appears to be quite a lot of overlap with /r/PersonalFinance, which would make sense considering much of the financial advice given by both sources is philosophically agnostic and somewhat ubiquitous in the world of personal finance.
There appears to be quite a lot of overlap with /r/PersonalFinance, which would make sense considering much of the financial advice given by both sources is philosophically agnostic and somewhat ubiquitous in the world of personal finance.
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For the UK, http://monevator.com and https://www.reddit.com/r/UKPersonalFinance/
Fire subs can be useful. r/fatfire, /r/financialindependence/
"Put it in index funds and do not touch it unless you need the money for an emergency", is as good of advice I have seen and will put you ahead of most people. Of course, there is more to it than that, such as the type of fund, the type of account, age, expenses, and other stuff.
"Put it in index funds and do not touch it unless you need the money for an emergency", is as good of advice I have seen and will put you ahead of most people. Of course, there is more to it than that, such as the type of fund, the type of account, age, expenses, and other stuff.
A lot of the generic risk averse advise is good enough for a very broad population
Even in the sources mentioned in this article, as well as the reddits mentioned in other comments.
Its just overly risk averse to be plainly wrong in some cases. But not wrong enough that you wont be fine, they just dont really tolerate deviance enough.
You need to know when to graduate and leave the playpen.
Even in the sources mentioned in this article, as well as the reddits mentioned in other comments.
Its just overly risk averse to be plainly wrong in some cases. But not wrong enough that you wont be fine, they just dont really tolerate deviance enough.
You need to know when to graduate and leave the playpen.
For a long time, Google Finance [1] & SeekingAlpha [2] were great sources of content on financial information. The former had great charting/data, but it is completely changed now. The latter, although it was not targeted towards beginners, provided a great amount of value in both articles, has depth of coverage across asset clasess, and the comments sections, but the site is now paywalled..
Mr Money Moustache [3] & Financial Samurai [4] are both good sources of Financial Independence type of content.
I used this in conjunction with:
r/personalfinance (great for thinking about spend to saving/investment ratios)
r/wallstreetbets (best for binary bets and high opportunity situations - only use with a speculative small percent )
r/realestateinvesting (all RE of course)
r/investing (general stuff)
There are a number of high quality videos on Youtube that I have found to be particularly good, depending on your own financial situation. Dave Ramsey, although maligned, is great for those with debt problems. I have no debt, and so his content has limited application for me.
I also read Investopedia [5] for general terms, Tastytrade [6] for options coverage, and many brokers provide a large amount of free content to understand investments.
[1] https://www.google.com/finance/
[2] https://seekingalpha.com/
[3] https://www.mrmoneymustache.com/
[4] https://www.financialsamurai.com/
[5] https://www.investopedia.com/
[6] https://www.tastytrade.com/
Mr Money Moustache [3] & Financial Samurai [4] are both good sources of Financial Independence type of content.
I used this in conjunction with:
r/personalfinance (great for thinking about spend to saving/investment ratios)
r/wallstreetbets (best for binary bets and high opportunity situations - only use with a speculative small percent )
r/realestateinvesting (all RE of course)
r/investing (general stuff)
There are a number of high quality videos on Youtube that I have found to be particularly good, depending on your own financial situation. Dave Ramsey, although maligned, is great for those with debt problems. I have no debt, and so his content has limited application for me.
I also read Investopedia [5] for general terms, Tastytrade [6] for options coverage, and many brokers provide a large amount of free content to understand investments.
[1] https://www.google.com/finance/
[2] https://seekingalpha.com/
[3] https://www.mrmoneymustache.com/
[4] https://www.financialsamurai.com/
[5] https://www.investopedia.com/
[6] https://www.tastytrade.com/
Rob Berger's youtube channel is pretty great, especially w.r.t investing for retirement. He's quite articulate and straight to the point on a lot of somewhat complex topics.
https://www.youtube.com/channel/UC9C17-OMxa-7oRSaCtztObw/fea...
https://www.youtube.com/channel/UC9C17-OMxa-7oRSaCtztObw/fea...
I've had trouble locating English language resources, but if you speak German:
- finanztip.de plus their social media presence are a great way to start
- Stiftung Warentest/Finanztest for general financial product tests
- Finanzfluss' social media presence is great, too.
- Smaller scale sources like Finanzwesir, Gerd Kommer's books plus his company's blog for well researched treatises of all things finance, backed by data.
- Education by workshop companies like Madame Moneypenny that teach hands on.
Those are my favorite sources.
- finanztip.de plus their social media presence are a great way to start
- Stiftung Warentest/Finanztest for general financial product tests
- Finanzfluss' social media presence is great, too.
- Smaller scale sources like Finanzwesir, Gerd Kommer's books plus his company's blog for well researched treatises of all things finance, backed by data.
- Education by workshop companies like Madame Moneypenny that teach hands on.
Those are my favorite sources.
This book is an excellent start and the author has made it available for free as a PDF (you can also get it on Amazon)
http://efficientfrontier.com/ef/0adhoc/ifyoucan.pdf
It lays out an effective retirement strategy in the first paragraph or so, and spends the rest of the book explaining it. Short and easy read. The strategy has to be adapted somewhat for non-Americans - if you're Canadian, the adaptations can be found at https://canadiancouchpotato.com/.
Like I said, it's a start, but it also recommends a lot of good and trustworthy resources to continue your learning after you read it. I found it through /r/personalfinance as the other commenter suggested.
http://efficientfrontier.com/ef/0adhoc/ifyoucan.pdf
It lays out an effective retirement strategy in the first paragraph or so, and spends the rest of the book explaining it. Short and easy read. The strategy has to be adapted somewhat for non-Americans - if you're Canadian, the adaptations can be found at https://canadiancouchpotato.com/.
Like I said, it's a start, but it also recommends a lot of good and trustworthy resources to continue your learning after you read it. I found it through /r/personalfinance as the other commenter suggested.
(Disclosure: I work on a startup in the personal finance space).
This is actually a much wider problem on two dimensions:
1. Beyond personal finance, a LOT of content out there right now is basically content marketing for something that's crafted more around "can it get SEO traffic" and "can it convert that traffic to something monetizable". It's just a giant funnel.
2. Even in personal finance, it's not just content. A lot of products that in theory should be helping you improve your finances are lead generation funnels too (especially the free ones). In other words, the marketing funnel extends beyond just content and pervades the very products we use.
For instance, a really popular (tens of millions of users) personal finance product just sent me an email recommending that I invest in art since "art has outperformed the S&P 500". It was an ad, but you'd have to read the fine print to see that. Another popular one (over 100M) has a tab on their site called "My Recommendations", with fine print saying "We suggest offers based on your credit, Approval Odds, and money we make from our partners". It's all for credit cards and personal loans.
This is actually a much wider problem on two dimensions:
1. Beyond personal finance, a LOT of content out there right now is basically content marketing for something that's crafted more around "can it get SEO traffic" and "can it convert that traffic to something monetizable". It's just a giant funnel.
2. Even in personal finance, it's not just content. A lot of products that in theory should be helping you improve your finances are lead generation funnels too (especially the free ones). In other words, the marketing funnel extends beyond just content and pervades the very products we use.
For instance, a really popular (tens of millions of users) personal finance product just sent me an email recommending that I invest in art since "art has outperformed the S&P 500". It was an ad, but you'd have to read the fine print to see that. Another popular one (over 100M) has a tab on their site called "My Recommendations", with fine print saying "We suggest offers based on your credit, Approval Odds, and money we make from our partners". It's all for credit cards and personal loans.
Credit Karma is interesting as they routinely have not differentiated between which things are informative and signals for your credit score and which things have nothing to do with that.
I believe they've gotten better after complaints and regulatory actions, but it is still largely ambiguous unless you know from other sources.
I believe they've gotten better after complaints and regulatory actions, but it is still largely ambiguous unless you know from other sources.
Personal finance is such a huge, profitable niche for YouTube. So much content, a lot of it machine-generated or paid. It's like an elite college in same way that there is an instructor for every student but rather a content writer or card offer for every viewer.
A lot of the very old marketing in financial services was content marketing. So you have seen relatively little disruption amongst the most sophisticated marketers...they do the exact same thing they were doing three decades ago, they just send it by email instead of calling or mailing.
There are differences: Motley Fool and Simply Wall St are two example of "innovators" (nominally SEO but in reality they just got into Google Feeds when it was easy to get in).
My point though is that industry hasn't really changed. They are still selling the same dogshit products. As a startup, you have to literally drag your customers kicking and screaming away from stuff that will bankrupt them...every...single...one.
(I say this as someone who ran a startup in the space that failed and then went into wealth management...the industry is horrible, horrible, horrible...with my startup, I made a couple of thousand and had individual clients who made $100k+ with my advice...still wouldn't listen to reason. When I worked in wealth management, we had clients who had money with us, were doing well, and then sold their business and decided they needed the "big name" financial advisor who would rip their face off in fees...I remember seeing the marketing docs for one of these pitches...$2.5m liquid cash account, I actually laughed at how bad it was (they had tried to construct a stock portfolio to generate fees, it was basically an index tracker)...I now do something else because I was just so jaded...but the irrational behaviour of people is brutally different to comprehend...it is anything to do with financial literacy either, some people just have no common sense, Warren Buffett is an example of how to do things, he decided what he was going to do, only people who aligned with the mission joined him...obviously, that doesn't really work outside of asset management).
There are differences: Motley Fool and Simply Wall St are two example of "innovators" (nominally SEO but in reality they just got into Google Feeds when it was easy to get in).
My point though is that industry hasn't really changed. They are still selling the same dogshit products. As a startup, you have to literally drag your customers kicking and screaming away from stuff that will bankrupt them...every...single...one.
(I say this as someone who ran a startup in the space that failed and then went into wealth management...the industry is horrible, horrible, horrible...with my startup, I made a couple of thousand and had individual clients who made $100k+ with my advice...still wouldn't listen to reason. When I worked in wealth management, we had clients who had money with us, were doing well, and then sold their business and decided they needed the "big name" financial advisor who would rip their face off in fees...I remember seeing the marketing docs for one of these pitches...$2.5m liquid cash account, I actually laughed at how bad it was (they had tried to construct a stock portfolio to generate fees, it was basically an index tracker)...I now do something else because I was just so jaded...but the irrational behaviour of people is brutally different to comprehend...it is anything to do with financial literacy either, some people just have no common sense, Warren Buffett is an example of how to do things, he decided what he was going to do, only people who aligned with the mission joined him...obviously, that doesn't really work outside of asset management).
I think a human should be able to live without doing any paperwork, and I think we have the ability to support this today.
It seems reasonable but nobody is going to agree on what “live” means
I'd say it means, at minimum, have a place they are allowed to shelter, and find enough food to sustain their existence.
“Find” food, as if the food just naturally appears in the world, waiting to be found.
Who produces this food? Who builds this shelter? Why do they do this? What makes them keep doing it? What would make them stop?
Who produces this food? Who builds this shelter? Why do they do this? What makes them keep doing it? What would make them stop?
Food does naturally appear in nature.
In fact, we survived the vast majority of our millenia of existence eating food that we found growing or wandering about.
It's _weird_ that we've created a situation where this is no longer the case, due to overpopulation, pollution, etc.
In fact, we survived the vast majority of our millenia of existence eating food that we found growing or wandering about.
It's _weird_ that we've created a situation where this is no longer the case, due to overpopulation, pollution, etc.
> In fact, we survived the vast majority of our millenia of existence eating food that we found growing or wandering about.
Yes, and those that failed to do so, starved and died. This has been very common occurrence, given the very low population numbers, 3-4 orders of magnitude below current ones — had there been more food, exponential growth would have ensured quick rise in population figures. Given plentiful food supplies, human population can grow extremely quickly. For example, Massachusetts colony population has grown 15-fold between 1650 and 1770, with almost all of this growth being natural. The point here is that hunter-gatherer communities never see their figures swell 15-fold in just 120 years, and that’s because of lack of resources, mostly food. Is this the regime you are recommending we return to?
> It's _weird_ that we've created a situation where this is no longer the case, due to overpopulation, pollution, etc.
Ah yes, the original sin of invention of agriculture.
The thing is, last 200 years is the only time in human history when we don’t have overpopulation. For most of the past history, the world has been filled with as many humans as their current technology and practices could have supported. It is only very recently that we have fewer humans than there could be, and this is most surely not thanks to the food naturally occurring in the nature.
Yes, and those that failed to do so, starved and died. This has been very common occurrence, given the very low population numbers, 3-4 orders of magnitude below current ones — had there been more food, exponential growth would have ensured quick rise in population figures. Given plentiful food supplies, human population can grow extremely quickly. For example, Massachusetts colony population has grown 15-fold between 1650 and 1770, with almost all of this growth being natural. The point here is that hunter-gatherer communities never see their figures swell 15-fold in just 120 years, and that’s because of lack of resources, mostly food. Is this the regime you are recommending we return to?
> It's _weird_ that we've created a situation where this is no longer the case, due to overpopulation, pollution, etc.
Ah yes, the original sin of invention of agriculture.
The thing is, last 200 years is the only time in human history when we don’t have overpopulation. For most of the past history, the world has been filled with as many humans as their current technology and practices could have supported. It is only very recently that we have fewer humans than there could be, and this is most surely not thanks to the food naturally occurring in the nature.
Did I recommend returning to a regime? Not sure where you pulled that out of. I'm talking about the historical facts that shaped our evolution. I humbly suggest that you try not to jump to strawman arguments so blindingly fast.
> For most of the past history, the world has been filled with as many humans as their current technology and practices could have supported.
... No. Not remotely true. Where do you pull these sweeping and bizarrely false statements from?
> For most of the past history, the world has been filled with as many humans as their current technology and practices could have supported.
... No. Not remotely true. Where do you pull these sweeping and bizarrely false statements from?
> Did I recommend returning to a regime? Not sure where you pulled that out of.
What was then the relevance of talking about abundance of food in prehistoric times?
> No. Not remotely true. Where do you pull these sweeping and bizarrely false statements from?
This has been widely known for centuries. Charles Darwin for example talks about it in “The Origin of Species”, not even as something novel, but rather as one of the basic assumptions about his theory of natural selection.
In fact, it is rather obvious. It is rather impossible to otherwise explain extremely low historical population figures, coupled with extremely high population growth rates possible. I mean, why hasn’t human population been 7 billion in 10 000 BC already? Your answer must necessarily involve “lack of ability to produce enough sustenance”. Then, why hasn’t it been even 1 billion? Or 100 million?
What was then the relevance of talking about abundance of food in prehistoric times?
> No. Not remotely true. Where do you pull these sweeping and bizarrely false statements from?
This has been widely known for centuries. Charles Darwin for example talks about it in “The Origin of Species”, not even as something novel, but rather as one of the basic assumptions about his theory of natural selection.
In fact, it is rather obvious. It is rather impossible to otherwise explain extremely low historical population figures, coupled with extremely high population growth rates possible. I mean, why hasn’t human population been 7 billion in 10 000 BC already? Your answer must necessarily involve “lack of ability to produce enough sustenance”. Then, why hasn’t it been even 1 billion? Or 100 million?
In the Western world, there is currently a mind-boggling abundance of food, with double-digit percentages being discarded.
With regards to shelter, it often does not require building in many places. What I am advocating for is allowing people to stay in public spaces if they are comfortable with it.
With regards to shelter, it often does not require building in many places. What I am advocating for is allowing people to stay in public spaces if they are comfortable with it.
As other people point out, a lot of the efforts seem a little half assed - rebranded marketing materials or simply boring.
I'm working on a simulator platform that leverages dapps built on Ethereum on a testnet to teach various financial concepts, and then abstracting away the complicated defi/blockchain gibberish to better reflect the real world.
Yield farming -> high yield bank account
NFTs -> buying illiquid assets like art or a house
altcoins -> buying stocks
p2p transactions -> cashapp/venmo
eventually there can be a way to surfacing more blockchain related concepts, but you can go quite far even with this simplified model. Ultimately, it'll be a lot more interesting than reading a book or watching a video.
Email is in bio if you think this is interesting and want to talk more.
I'm working on a simulator platform that leverages dapps built on Ethereum on a testnet to teach various financial concepts, and then abstracting away the complicated defi/blockchain gibberish to better reflect the real world.
Yield farming -> high yield bank account
NFTs -> buying illiquid assets like art or a house
altcoins -> buying stocks
p2p transactions -> cashapp/venmo
eventually there can be a way to surfacing more blockchain related concepts, but you can go quite far even with this simplified model. Ultimately, it'll be a lot more interesting than reading a book or watching a video.
Email is in bio if you think this is interesting and want to talk more.
Nothing says “basic financial literacy” like altcoins and NFTs.
The problem with financial literacy is that it is mostly gained by experience, at which point it may be too late.
It isn't.
The same things have been happening in financial markets for two centuries. I will say it is remarkable how few people take an interest in looking at this kind of thing. History, particularly in the US, is regarded with derision. Economists believe that nothing in the past could be relevant any more...their expert guidance has moved us to a higher plane of existence...
...and if you look at history, you will see that almost everyone back then thought the exact same thing too (I say almost, when things really went to shit you find that humility tends to last a bit longer...there is zero humility today).
This all applies to personal finance too. All the financial problems that people have are problems of human nature.
The same things have been happening in financial markets for two centuries. I will say it is remarkable how few people take an interest in looking at this kind of thing. History, particularly in the US, is regarded with derision. Economists believe that nothing in the past could be relevant any more...their expert guidance has moved us to a higher plane of existence...
...and if you look at history, you will see that almost everyone back then thought the exact same thing too (I say almost, when things really went to shit you find that humility tends to last a bit longer...there is zero humility today).
This all applies to personal finance too. All the financial problems that people have are problems of human nature.
Personal finance is way different from macro finance though. 'Personal' introduces new problems that cannot always be picked up a textbook. Personal means it's your money. So you have full accountability and so many pitfalls.
Again, the problems that people were having 10, 50, 100 years ago are largely the same ones as today.
The financial industry has changed in some ways but most of it is exactly the same.
Viewing everything as personal is why people don't learn from history. This is why financial markets have cycles.
The financial industry has changed in some ways but most of it is exactly the same.
Viewing everything as personal is why people don't learn from history. This is why financial markets have cycles.
The article raises a very good question: does financial literacy make a difference?
We all know not to eat junk food or buy stuff on credit..
Perhaps, we should make it harder to get credit, take loans, etc.
And could make we should make it easier to save for retirement, maybe a monthly contribution should be the default.
IMO payday loans or quick loans should be regulated to have limited interest. And if issued to someone the bank didn't verify as having credit worthiness the loan should be forfeited without being repayment. Or something like that.
There's too much predatory lending today. Certainly the barrier to taking such loans could be higher.
I think that's more effective than education.
We all know not to eat junk food or buy stuff on credit..
Perhaps, we should make it harder to get credit, take loans, etc.
And could make we should make it easier to save for retirement, maybe a monthly contribution should be the default.
IMO payday loans or quick loans should be regulated to have limited interest. And if issued to someone the bank didn't verify as having credit worthiness the loan should be forfeited without being repayment. Or something like that.
There's too much predatory lending today. Certainly the barrier to taking such loans could be higher.
I think that's more effective than education.
One problem with personal finance is that good general advice is often simple and changes infrequently, and good specific advice is not generally applicable. This is a problem because anything in the media which wants to cover personal finance is not generally willing to print the same bit of advice week in week out. And the problem is compounded by the people with that simple good advice being worried about laws on giving financial advice. So if one follows personal finance media, one may get the impression that it is hard to make good investments and that one must find weird risky lucrative opportunities, because much content is either about new investment possibilities (advertised or not) or sob stories about people who fell for some dodgy scam while thinking they were making the most risk free investment possible (and generating a 10% return). There can sometimes also be commentary on tax rule changes which I don’t really have much to say about.
I would argue that most of the time you don't need good specific advice.
One can get by quite well with just following good general advice.
From anecdotal experience I see people who don't have basics like "spend less than you earn" are looking for magic fixes like "buy those magic stocks or coins" ... no you cannot invest in stocks/coins/anything if you consistently fall behind with your utilities payments or spend all your salary on booze on first weekend after payday.
One can get by quite well with just following good general advice.
From anecdotal experience I see people who don't have basics like "spend less than you earn" are looking for magic fixes like "buy those magic stocks or coins" ... no you cannot invest in stocks/coins/anything if you consistently fall behind with your utilities payments or spend all your salary on booze on first weekend after payday.
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Investment choices advice can almost always be generic. Things like how much to save less so, but rules of thumb are still widely applicable.
But when it comes down to something like tax optimization the variables start multiplying quickly—-state of residency, income, employer benefits, etc, etc. There’s a need out there for decent advice but not an exorbitant cost. On the flip side, as an advisor it’s tough to make a living without charging a lot because there’s a lot of overhead and non billable time.
All of this wasted time is unnecessary, there’s no good reason that the systems have to be so complicated that even intelligent people get lost in all the details.
But when it comes down to something like tax optimization the variables start multiplying quickly—-state of residency, income, employer benefits, etc, etc. There’s a need out there for decent advice but not an exorbitant cost. On the flip side, as an advisor it’s tough to make a living without charging a lot because there’s a lot of overhead and non billable time.
All of this wasted time is unnecessary, there’s no good reason that the systems have to be so complicated that even intelligent people get lost in all the details.
Right. The point I was making is that the generally applicable advice rarely changes and so is not interesting to a publication (or broadcaster) and the specific detailed advice is usually only useful for a very small number of people so is not so useful to the readers/listeners/viewers.
> no you cannot invest in stocks/coins/anything if you consistently fall behind with your utilities payments or spend all your salary on booze on first weekend after payday.
Well, this is another trap!
You CAN.
----
One thing that i failed for YEARS was follow this "advice", in special with relation with crypto. I get in and out of it, because I get worried about it, like this say.
What I finally "get" was that if you "invest, even little, and not quit!" you WILL get some of it later. And WILL get MUCH MORE than NOT DO IT!
Daaaaaammmm. I lost so much just because I was unable to do it consistently.
---
P.D: How I get this? My family caught the idea of saving all extra coins of low value we get in daily buys. Eventually, after a while, that money was enough for a decent buy of things (iPhones, Computers,...)
Small coins. No value money, things you will lose after the day and not see it again.
But because we "invest" and "save it" for long enough, it become sizable (and yes, I'm not rich and was in dire economic situations).
---
So? go invest, even if pennies.
Well, this is another trap!
You CAN.
----
One thing that i failed for YEARS was follow this "advice", in special with relation with crypto. I get in and out of it, because I get worried about it, like this say.
What I finally "get" was that if you "invest, even little, and not quit!" you WILL get some of it later. And WILL get MUCH MORE than NOT DO IT!
Daaaaaammmm. I lost so much just because I was unable to do it consistently.
---
P.D: How I get this? My family caught the idea of saving all extra coins of low value we get in daily buys. Eventually, after a while, that money was enough for a decent buy of things (iPhones, Computers,...)
Small coins. No value money, things you will lose after the day and not see it again.
But because we "invest" and "save it" for long enough, it become sizable (and yes, I'm not rich and was in dire economic situations).
---
So? go invest, even if pennies.
I dunno about you, but when I was in "dire economic situations" I too saved my pennies. The difference is that I had to use those pennies to buy food, or gas to go to doctor appointments, or gas to go to work.
It's unfortunate how many people have disposable income and still think they were in "dire economic situations".
It's unfortunate how many people have disposable income and still think they were in "dire economic situations".
How far in the deep make a difference, but is easy to not even see a way out when afloat.
That is why I say is a "trap" instead of being wrong. I lived in one of the worst places on the city of Medellin in the worse times of that. And even there, you see that people get some income and waste it, every time, because never see a future.
That is the trap.
That is why I say is a "trap" instead of being wrong. I lived in one of the worst places on the city of Medellin in the worse times of that. And even there, you see that people get some income and waste it, every time, because never see a future.
That is the trap.
Absolutely agree with this. Good financial advice is boring. It basically boils down to don't spend your money on unneeded things and put the savings in safe-ish long term, low cost investments (cash, bonds, index funds). Anything else is window dressing. Most people should just go live their life without diving any deeper.
It's hard to 'feel' that this advice is true when we constantly see news about people winning the cryptocurrency, NFT, influencer or other capital gains lottery.
And I say feel because people act more according to their feelings about the world than anything else
And I say feel because people act more according to their feelings about the world than anything else
Relatedly, I've never liked "literacy" as the word here; actual literacy is (at least where I'm from) a relatively low bar and mostly a binary, either you can read or you cant. And most importantly, the economic system I live in isn't primarily pointed towards thwarting your "reading."
Again, for better or worse. Not to necessarily judge capitalism as inherently bad, but it feels like calling it "literacy" carries some judgmental baggage; what we call "financial literacy" is more difficult and shifting all the time.
Again, for better or worse. Not to necessarily judge capitalism as inherently bad, but it feels like calling it "literacy" carries some judgmental baggage; what we call "financial literacy" is more difficult and shifting all the time.
Literacy is a skill. Skills have degrees of proficiency.
Literacy is not a binary, can be quantified, and is.
And on average, it's far lower than you might think, expect, or hope.
"Adult Literacy in the United States" (2019)
https://nces.ed.gov/pubs2019/2019179/index.asp
(https://news.ycombinator.com/item?id=28348039)
Literacy is not a binary, can be quantified, and is.
And on average, it's far lower than you might think, expect, or hope.
"Adult Literacy in the United States" (2019)
https://nces.ed.gov/pubs2019/2019179/index.asp
(https://news.ycombinator.com/item?id=28348039)
I'm aware of the denotation, I'm talking about the connotation.
You'd mentioned several specifics in your earlier comment:
"actual literacy is (at least where I'm from) a relatively low bar and mostly a binary, either you can read or you cant."
Again: I've given you a link that provides extensive evidence that all three of those claims are false.
- Literacy isn't a binary.
- Bar placement is in fact high.
- Reading skills cover a considerable range.
If you persist in your argument, you'd be doing so in denial of esablished facts.
"actual literacy is (at least where I'm from) a relatively low bar and mostly a binary, either you can read or you cant."
Again: I've given you a link that provides extensive evidence that all three of those claims are false.
- Literacy isn't a binary.
- Bar placement is in fact high.
- Reading skills cover a considerable range.
If you persist in your argument, you'd be doing so in denial of esablished facts.
I think the phrase "how literate are you?" has meaning, though.
I'm a native English speaker, and fully literate when reading an English text. However, if that text is about macro-economics and written at the PhD level, I'm going to struggle with it, even if I know what all the words mean in isolation. But if it's about software engineering and written at a college level, I'll have no trouble.
Also, in these contexts, "literate" is used more to mean "has read and understood," not "could read and understand." Being financially literate doesn't mean "if I read an article about why carrying a high balance on a high interest rate credit card is a bad idea, I would walk away understanding those concepts," it means "I know why carrying a high balance on a high interest rate credit card is a bad idea, and I don't do that."
I'm a native English speaker, and fully literate when reading an English text. However, if that text is about macro-economics and written at the PhD level, I'm going to struggle with it, even if I know what all the words mean in isolation. But if it's about software engineering and written at a college level, I'll have no trouble.
Also, in these contexts, "literate" is used more to mean "has read and understood," not "could read and understand." Being financially literate doesn't mean "if I read an article about why carrying a high balance on a high interest rate credit card is a bad idea, I would walk away understanding those concepts," it means "I know why carrying a high balance on a high interest rate credit card is a bad idea, and I don't do that."
So much of finance is based on the concept of "time value of money," that I wonder when people notice that it has been essentially zero (or negative) for a while now.
[deleted]
>The big picture: Evidence that financial literacy education works is shaky; most evidence points to it being a waste of time.
"waste of time" is a link that takes you to the research paper from Loyola Law School, which they're using to assert this statement.
I made it just over half way through the research paper, and then I stopped reading. This is a very poorly written, inaccessible paper, and I am left wondering if it's intentionally made that difficult to read. And I wonder if the Axios writer actually read that article or had any skepticism towards its findings.
I'll call out just a few of the issues I take with this "research paper":
>The main points of the chapter are three-fold. First, financial education cannot produce financial well-being in the current marketplace. Second, alternative interventions have the potential to enhance individual capacity for, and reduce marketplace obstacles to, good financial outcomes. Third, even programs that arm individuals with optimized capacities and a marketplace that facilitates individually optimal actions will not be enough to ensure widespread financial well- being. That would require changes in our socioeconomic order that might require a different intervention—finance-informed citizenship education.
But if you read through the author's arguments, they're more of less picking apart the methodology of some studies that disagree with the author's perspective (against teaching financial literacy). Even if the methodology of these other research was flawed, it doesn't disprove anything. That's more of a missing data point. For example, the author complains that in one trial, the treatment group received a savings match whereas the control did not. And therefore, the methodology is flawed. Okay – sure. But in other examples, if the methodology is correct, then the author doesn't agree with the conclusions/extrapolations of the other study.
And there are other parts that are perplexing:
>Financial education has opportunity costs. Participants lose more productive uses of their time. Society suffers a diversion of time, money, and attention from alternatives with better prospects for successfully increasing financial well-being.
Yes, any kind of education has an opportunity cost. So what? My high school had geography class taught by football coaches. We simply copied the textbook onto a sheet of paper and turned it in. There are many countries that I couldn't identify on a map. That form of learning wasn't effective. I would have loved to learn about savings and compound interest. My expectation in high school was that I could have a 9/5 job that makes me a multi-millionaire.
Then the author goes on to state other reasons against financial literacy:
>It can increase financial confidence without a commensurate improvement in knowledge (Bucciol et al., 2020).
But is that a strong reason to not provide financial literacy at all? Because person A doesn't have sufficient self control and might dump their savings into meme stocks, is that a reason to not teach children about the stock market at all?
I try to avoid being overly critical – but this is a poorly written, joke of a research paper. I'm honestly questioning if the author or faculty are under the gun to produce these papers as some performance metric.
And shame on Axios for pointing to this garbage as an authoritative source.
"waste of time" is a link that takes you to the research paper from Loyola Law School, which they're using to assert this statement.
I made it just over half way through the research paper, and then I stopped reading. This is a very poorly written, inaccessible paper, and I am left wondering if it's intentionally made that difficult to read. And I wonder if the Axios writer actually read that article or had any skepticism towards its findings.
I'll call out just a few of the issues I take with this "research paper":
>The main points of the chapter are three-fold. First, financial education cannot produce financial well-being in the current marketplace. Second, alternative interventions have the potential to enhance individual capacity for, and reduce marketplace obstacles to, good financial outcomes. Third, even programs that arm individuals with optimized capacities and a marketplace that facilitates individually optimal actions will not be enough to ensure widespread financial well- being. That would require changes in our socioeconomic order that might require a different intervention—finance-informed citizenship education.
But if you read through the author's arguments, they're more of less picking apart the methodology of some studies that disagree with the author's perspective (against teaching financial literacy). Even if the methodology of these other research was flawed, it doesn't disprove anything. That's more of a missing data point. For example, the author complains that in one trial, the treatment group received a savings match whereas the control did not. And therefore, the methodology is flawed. Okay – sure. But in other examples, if the methodology is correct, then the author doesn't agree with the conclusions/extrapolations of the other study.
And there are other parts that are perplexing:
>Financial education has opportunity costs. Participants lose more productive uses of their time. Society suffers a diversion of time, money, and attention from alternatives with better prospects for successfully increasing financial well-being.
Yes, any kind of education has an opportunity cost. So what? My high school had geography class taught by football coaches. We simply copied the textbook onto a sheet of paper and turned it in. There are many countries that I couldn't identify on a map. That form of learning wasn't effective. I would have loved to learn about savings and compound interest. My expectation in high school was that I could have a 9/5 job that makes me a multi-millionaire.
Then the author goes on to state other reasons against financial literacy:
>It can increase financial confidence without a commensurate improvement in knowledge (Bucciol et al., 2020).
But is that a strong reason to not provide financial literacy at all? Because person A doesn't have sufficient self control and might dump their savings into meme stocks, is that a reason to not teach children about the stock market at all?
I try to avoid being overly critical – but this is a poorly written, joke of a research paper. I'm honestly questioning if the author or faculty are under the gun to produce these papers as some performance metric.
And shame on Axios for pointing to this garbage as an authoritative source.
A little off topic but I noticed whenever these financial literacy threads come up - the only people whose point of view I care about are those who had been poor and found ways out of it. Those are the people who "figured it out" and I want people to know what they know.
Everyone else is theorizing. If you had always been rich, you may think poor people are lazy, or you may believe they are deeply stuck. If you're poor, you may also think you're stuck because you're not seeing ways. Both of these categories of people's views are irrelevant to the topic. I don't want to hear that something is "easy" or "impossible" from those who haven't done it.
I want to hear from those who've done it and learn from them.
As a conceptual shortcut, I'd want to understand what immigrant and first-generation Asians do, and do that.
Everyone else is theorizing. If you had always been rich, you may think poor people are lazy, or you may believe they are deeply stuck. If you're poor, you may also think you're stuck because you're not seeing ways. Both of these categories of people's views are irrelevant to the topic. I don't want to hear that something is "easy" or "impossible" from those who haven't done it.
I want to hear from those who've done it and learn from them.
As a conceptual shortcut, I'd want to understand what immigrant and first-generation Asians do, and do that.
> As a conceptual shortcut, I'd want to understand what immigrant and first-generation Asians do, and do that.
It's pretty simply actually. They try to hold a steady job, save a high percentage of their income, don't have expensive hobbies, buy some property in the best school district they can and spend a lot of time on their kids education to get them into good colleges and elite professions like doctor, engineer etc.
Kids learn good financial habits from their parents, and repeat the cycle with some additional knowledge (index funds, rental properties etc.) until they "make" it.
It's pretty simply actually. They try to hold a steady job, save a high percentage of their income, don't have expensive hobbies, buy some property in the best school district they can and spend a lot of time on their kids education to get them into good colleges and elite professions like doctor, engineer etc.
Kids learn good financial habits from their parents, and repeat the cycle with some additional knowledge (index funds, rental properties etc.) until they "make" it.
Also a first-generation Asian (on one side of the family), and my wife is one too.
This is absolutely right. It basically comes down to "Make (a lot) more than you spend. Invest the difference in scarce, desirable cash-flowing assets. Borrow money iff the expected returns from the asset exceed the interest rate."
These are really simple rules, but really hard to execute. The advantage that immigrants (and some of their kids) have is that they haven't internalized all the subconscious messages American society imparts. So for example my sister lives in Texas, where everything is bigger, and her home is like 50% bigger than my Bay Area one (which I thought was a huge extravagance). But she's always like "Yeah, the neighbors all have bigger houses, and their kids have like twice as many toys, and our kids' friends all have bouncy castles inside the home, and we need to buy them a play structure so we don't waste time going to the playground." So money goes out the door on a bouncy castle, and a play structure, and full-service landscaping, and home improvements, and even more toys.
Meanwhile, a typical Asian immigrant is like "Who need more than 4 walls and a bed? Why you care if other people think you poor, when your bank account go up?" My wife is like "We're gonna all end up in one big family bed anyways. Let's look into converting the house into a duplex and renting out the downstairs."
This is absolutely right. It basically comes down to "Make (a lot) more than you spend. Invest the difference in scarce, desirable cash-flowing assets. Borrow money iff the expected returns from the asset exceed the interest rate."
These are really simple rules, but really hard to execute. The advantage that immigrants (and some of their kids) have is that they haven't internalized all the subconscious messages American society imparts. So for example my sister lives in Texas, where everything is bigger, and her home is like 50% bigger than my Bay Area one (which I thought was a huge extravagance). But she's always like "Yeah, the neighbors all have bigger houses, and their kids have like twice as many toys, and our kids' friends all have bouncy castles inside the home, and we need to buy them a play structure so we don't waste time going to the playground." So money goes out the door on a bouncy castle, and a play structure, and full-service landscaping, and home improvements, and even more toys.
Meanwhile, a typical Asian immigrant is like "Who need more than 4 walls and a bed? Why you care if other people think you poor, when your bank account go up?" My wife is like "We're gonna all end up in one big family bed anyways. Let's look into converting the house into a duplex and renting out the downstairs."
You're right, saving a high percentage of your income is pretty simple. For those with disposable income to save.
My single mom raised two kids on $20k a year. I make $400k / yr after 8 years in industry.
My big tricks: - being a really talented programmer - quitting jobs and trading up until I found a good level - spending money to make myself more comfortable, less stressed, more effective - saving a ton of money
Learning to spend money was remarkably hard.
My big tricks: - being a really talented programmer - quitting jobs and trading up until I found a good level - spending money to make myself more comfortable, less stressed, more effective - saving a ton of money
Learning to spend money was remarkably hard.
That's what the book "The Millionaire Next Door" by Stanley covers.
In one sentence: live below your means, and invest the difference.
In one sentence: live below your means, and invest the difference.
> A little off topic but I noticed whenever these financial literacy threads come up - the only people whose point of view I care about are those who had been poor and found ways out of it. Those are the people who "figured it out" and I want people to know what they know.
So I can't precisely say I'm part of this group, but I'm definitely associated with it. My parents divorced early, and living with one, for several years, involved food insecurity while living with the other involved being at the 90th percentile of HH income (though not wealth).
I'm now on my own, and while I wouldn't say I've 'figured it out', I'm in a position where if I never saved another dollar I'd at least be able to retire by 40.
I've seen three broad categories of children who end up successful with money. In order of pain of childhood:
1. Children of parents who are successful, who then replicate the model their parents used. This is a buddy of mine who is a doctor because his dad is a doctor and he liked what he saw growing up.
2. Children of parents who are successful to a limited point, and instill in their child the need to adopt a better model to live a better life. This is the child-of-immigrants experience that you allude to. I had a friend in college, for example, who's dad paid for her tuition but hadn't seen a dentist in 20 years. His basic message to her was: "You can work 60 hours a week like I do, and this is the best you can get. If you want to do better then do well in school."
3. Children whose parent or parents are destructively unsuccessful: addicts, criminals, etc. In this case the operative thinking is "I'll do anything to avoid this outcome". I'd predominately put myself in this category.
I'd guess that if you polled most successful people, they'd predominately come from 2 or 3 rather than 1. And I think this effect occurs because a life spent following the path of least resistance (at least in an American context) seems to end poorly for most people. Divorce is common, and financially most people don't end up with enough money to support themselves in old age (and Social Security is of dubious ability to continue to do so).
As a result, when you're looking for successful people you're looking for people who have been catalyzed out of the "normal path" or path of least resistance. Sometimes it's the presence of an obviously better alternative as in (1), but most of the time it's a really painful association with the normal path as in (2) or (3), which then motivates them to seek out something different.
So I can't precisely say I'm part of this group, but I'm definitely associated with it. My parents divorced early, and living with one, for several years, involved food insecurity while living with the other involved being at the 90th percentile of HH income (though not wealth).
I'm now on my own, and while I wouldn't say I've 'figured it out', I'm in a position where if I never saved another dollar I'd at least be able to retire by 40.
I've seen three broad categories of children who end up successful with money. In order of pain of childhood:
1. Children of parents who are successful, who then replicate the model their parents used. This is a buddy of mine who is a doctor because his dad is a doctor and he liked what he saw growing up.
2. Children of parents who are successful to a limited point, and instill in their child the need to adopt a better model to live a better life. This is the child-of-immigrants experience that you allude to. I had a friend in college, for example, who's dad paid for her tuition but hadn't seen a dentist in 20 years. His basic message to her was: "You can work 60 hours a week like I do, and this is the best you can get. If you want to do better then do well in school."
3. Children whose parent or parents are destructively unsuccessful: addicts, criminals, etc. In this case the operative thinking is "I'll do anything to avoid this outcome". I'd predominately put myself in this category.
I'd guess that if you polled most successful people, they'd predominately come from 2 or 3 rather than 1. And I think this effect occurs because a life spent following the path of least resistance (at least in an American context) seems to end poorly for most people. Divorce is common, and financially most people don't end up with enough money to support themselves in old age (and Social Security is of dubious ability to continue to do so).
As a result, when you're looking for successful people you're looking for people who have been catalyzed out of the "normal path" or path of least resistance. Sometimes it's the presence of an obviously better alternative as in (1), but most of the time it's a really painful association with the normal path as in (2) or (3), which then motivates them to seek out something different.
> the only people whose point of view I care about are those who had been poor and found ways out of it. Those are the people who "figured it out" and I want people to know what they know.
Apologies for not being one such person. But doesn't this assume the libertarian (or conservative) view that financial wellness is a result of individual action?
As the article says at the end:
> Such curricula also tend to reinforce a libertarian view of financial wellness, based on individual rather than collective action — one where poverty and debt are less a societal problem and more a consequence of bad individual financial decisions.
Of course there is an individual component to it. But the most effective way to get people to save for retirement, is to make such savings the default configuration.
There's many subtle ways to configure society such that people make good financial choices.
Educating people to take action, seems a lot harder than just making sure your life has a sane default setup, if you do nothing :)
Apologies for not being one such person. But doesn't this assume the libertarian (or conservative) view that financial wellness is a result of individual action?
As the article says at the end:
> Such curricula also tend to reinforce a libertarian view of financial wellness, based on individual rather than collective action — one where poverty and debt are less a societal problem and more a consequence of bad individual financial decisions.
Of course there is an individual component to it. But the most effective way to get people to save for retirement, is to make such savings the default configuration.
There's many subtle ways to configure society such that people make good financial choices.
Educating people to take action, seems a lot harder than just making sure your life has a sane default setup, if you do nothing :)
I actually am not a big believer that people can be educated on something they don't want to be educated about so I am with you on that. So ln the surface your idea of a good default setup makes sense.
But I am cynical about that working because I wouldn't trust anyone with the power to set the default, especially when the people they are setting the default for aren't able or interested to understand if it's done poorly or well.
But I am cynical about that working because I wouldn't trust anyone with the power to set the default, especially when the people they are setting the default for aren't able or interested to understand if it's done poorly or well.
> I wouldn't trust anyone with the power to set the default
This is why Americans don't have health insurance by default :)
In other countries these defaults are setup by union, politicians, NGOs, interest organizations, etc.
I think you have a fair point though: you can't easily create trust -- nor can you easily build up a system of such defaults. It takes time.
For example: In Denmark there is no legal requirement that your employer pays into a pension scheme. Yet, almost all employers do, negotiated through unions etc. And when you get a job the usually setup a default contribution from you too, which you can tweak/reduce if you want to -- most people never touch it.
This is why Americans don't have health insurance by default :)
In other countries these defaults are setup by union, politicians, NGOs, interest organizations, etc.
I think you have a fair point though: you can't easily create trust -- nor can you easily build up a system of such defaults. It takes time.
For example: In Denmark there is no legal requirement that your employer pays into a pension scheme. Yet, almost all employers do, negotiated through unions etc. And when you get a job the usually setup a default contribution from you too, which you can tweak/reduce if you want to -- most people never touch it.
The idea of financial literacy was always a "shift of responsibility" tactic. Credit card and payday loan companies and other financial companies that preyed on people could avoid regulatory clampdowns by recharacterizing a problem with their business models as an educational issue or a personal responsibility issue.
It's broadly similar to how oil companies became so very keen on recycling and "everybody doing their bit" in the 1970s onward.
It's broadly similar to how oil companies became so very keen on recycling and "everybody doing their bit" in the 1970s onward.
>Credit card and payday loan companies and other financial companies that preyed on people could avoid regulatory clampdowns by recharacterizing a problem with their business models as an educational issue or a personal responsibility issue.
They have? Maybe I'm missing all the credit card/payday loan campaign ads, but I haven't seen any ads to that effect. Then again I also haven't seen that many ads to begin with so I'm not a reliable source. A source for your claim would be appreciated either way. That said, if I were to steelman their argument I draw parallels to drug policy and argue for it based on harm reduction. ie. "people are going to get usurious loans either way, better it be from regulated businesses than loan sharks. the high interest rates are required because of the default rates associated with the client base".
They have? Maybe I'm missing all the credit card/payday loan campaign ads, but I haven't seen any ads to that effect. Then again I also haven't seen that many ads to begin with so I'm not a reliable source. A source for your claim would be appreciated either way. That said, if I were to steelman their argument I draw parallels to drug policy and argue for it based on harm reduction. ie. "people are going to get usurious loans either way, better it be from regulated businesses than loan sharks. the high interest rates are required because of the default rates associated with the client base".
https://www.capitalone.com/about/newsroom/brandon-copeland-f...
Example : Credit card company that gets lots of stick in Congress getting real keen on financial literacy promoted by [ famous football player ]
Capital one in congress pushing for "more financial literacy" as a solution to Americans' financial woes: https://www.banking.senate.gov/download/hildebrand-july-29-2...
Example : Credit card company that gets lots of stick in Congress getting real keen on financial literacy promoted by [ famous football player ]
Capital one in congress pushing for "more financial literacy" as a solution to Americans' financial woes: https://www.banking.senate.gov/download/hildebrand-july-29-2...
The core problem is that the interest rate is far below the inflation rate. You have to get your money out of the bank into various risky schemes.
Money in the bank is at risk due to inflation and pathetic interest.
Individual investments in stock are at risk through stock price volatility, competition, regulation/taxes, to name a few.
Broad investments diversified across asset class, and currency, appropriately hedged, as an overall plan, are quite resilient to risk.
Individual investments in stock are at risk through stock price volatility, competition, regulation/taxes, to name a few.
Broad investments diversified across asset class, and currency, appropriately hedged, as an overall plan, are quite resilient to risk.
The financial literacy stuff is pretty interesting.
Take Schwab, for example - if I follow the easiest to access and lowest effort version of their advice, I'll probably save a decent amount, hold too much of it in cash, but be able to retire at a standard of living similar to what I'm used to at about the time people "normally" retire.
They'll make some money off of me lending the cash I held too much of.
But it probably amounts to maybe retiring a couple years earlier or later at most, and if minimizing retirement date was the #1 most valuable thing to me, a) I'd identify that my early to mid-career saving rate makes the most difference, and b) look for more sources of information than Schwab. (Which is too say non-optimal advice is not specifically bad advice. Particularly when considering human behavior.)
If we apply that to financial education run by Schwab, they're probably identifying that their biggest growth opportunity is getting more people to invest through them, hopefully keeping enough cash liquidity to improve their lending business. (Encouraging an emergency fund to be held in cash through their money market accounts, and getting tons of people to use that over standard checking would probably be great for them.)
But there's an important pre-qualification: You have to financially be in a position to save and invest money for any of this to matter. Someone can't really be in a paycheck-to-paycheck trap or inescapable debt trap, they need to be out of it. Because it doesn't matter if you know that debt is bad when you're facing eviction or about to miss work because your car broke down.
If someone has an unfortunate socioeconomic background, emulated the adults around them, stumbled out of high school, and are working minimum wage jobs, they didn't need financial literacy.
They needed something like different education, nutrition, parenting, rewards structures, or who knows what.
Presumably even something like getting pushed into a trade like a plumber or mechanic would pay more dividends than any particular financial knowledge about avoiding debt or saving.
Where financial knowledge can help is people who are already in a position to generate income and assets, but have made bad decisions. Whether it's someone with upper class connections but an art degree and college debt, or a teacher who went into debt on a home renovation or car purchase. And this is what marketing financial literacy is about: the realization that being a less crazy Dave Ramsey can drive business to your financial service company. And that if that works out, your customers will be very loyal.
Which is to say, it shouldn't be surprising that financial literacy education on average isn't super helpful at reducing poverty and such.
Take Schwab, for example - if I follow the easiest to access and lowest effort version of their advice, I'll probably save a decent amount, hold too much of it in cash, but be able to retire at a standard of living similar to what I'm used to at about the time people "normally" retire.
They'll make some money off of me lending the cash I held too much of.
But it probably amounts to maybe retiring a couple years earlier or later at most, and if minimizing retirement date was the #1 most valuable thing to me, a) I'd identify that my early to mid-career saving rate makes the most difference, and b) look for more sources of information than Schwab. (Which is too say non-optimal advice is not specifically bad advice. Particularly when considering human behavior.)
If we apply that to financial education run by Schwab, they're probably identifying that their biggest growth opportunity is getting more people to invest through them, hopefully keeping enough cash liquidity to improve their lending business. (Encouraging an emergency fund to be held in cash through their money market accounts, and getting tons of people to use that over standard checking would probably be great for them.)
But there's an important pre-qualification: You have to financially be in a position to save and invest money for any of this to matter. Someone can't really be in a paycheck-to-paycheck trap or inescapable debt trap, they need to be out of it. Because it doesn't matter if you know that debt is bad when you're facing eviction or about to miss work because your car broke down.
If someone has an unfortunate socioeconomic background, emulated the adults around them, stumbled out of high school, and are working minimum wage jobs, they didn't need financial literacy.
They needed something like different education, nutrition, parenting, rewards structures, or who knows what.
Presumably even something like getting pushed into a trade like a plumber or mechanic would pay more dividends than any particular financial knowledge about avoiding debt or saving.
Where financial knowledge can help is people who are already in a position to generate income and assets, but have made bad decisions. Whether it's someone with upper class connections but an art degree and college debt, or a teacher who went into debt on a home renovation or car purchase. And this is what marketing financial literacy is about: the realization that being a less crazy Dave Ramsey can drive business to your financial service company. And that if that works out, your customers will be very loyal.
Which is to say, it shouldn't be surprising that financial literacy education on average isn't super helpful at reducing poverty and such.
Every time any thread comes up on HN about finances, it's full of people who haven't been poor a day in their life saying "I did it so you can too". It's actually pretty depressing.
Ehh, the problem is we have an entire industry trying to convince us all we need more stuff. Since we don't have infinite money, you have the credit industry which allows one to get all this stuff NOW!
Then once your really in deep , you have debt consolidation companies to try and restructure your debt. Then finally once you file for bankruptcy, a hoard of easy credit scams will offer you a nice new(ish) car at 27% apr.
To build on a point I've made in another thread, be careful who your around. If you meet someone nice by impressing them with your car, they really just want you to buy em one too. Then they'll drive off with someone else into the sunset. I'm very lucky in that I've been able to meet great not-so materialistic folks. A friend of mine did very well dating driving an old 90s era car. But billions are spent by Ford, etc, on convincing you that once you sign a 84 month car note for some bloated ton of steel, EVERYONE WILL LOVE YOU.
Case in point, one of my previous partners , despite making nearly 200k, was still using a cracked-screen Iphone 6. No mater how much you make if you think you need more junk to impress people it won't be enough. Limit your social media usage. Don't entertain anyone who thinks they deserve to be 'supported'. This goes for family members too.
I ran into real trouble trying to help my family. 20k+ in credit card debt at a point and it still wasn't enough for them.
Then once your really in deep , you have debt consolidation companies to try and restructure your debt. Then finally once you file for bankruptcy, a hoard of easy credit scams will offer you a nice new(ish) car at 27% apr.
To build on a point I've made in another thread, be careful who your around. If you meet someone nice by impressing them with your car, they really just want you to buy em one too. Then they'll drive off with someone else into the sunset. I'm very lucky in that I've been able to meet great not-so materialistic folks. A friend of mine did very well dating driving an old 90s era car. But billions are spent by Ford, etc, on convincing you that once you sign a 84 month car note for some bloated ton of steel, EVERYONE WILL LOVE YOU.
Case in point, one of my previous partners , despite making nearly 200k, was still using a cracked-screen Iphone 6. No mater how much you make if you think you need more junk to impress people it won't be enough. Limit your social media usage. Don't entertain anyone who thinks they deserve to be 'supported'. This goes for family members too.
I ran into real trouble trying to help my family. 20k+ in credit card debt at a point and it still wasn't enough for them.
learning almost ANYTHING from any commercial entity is like taking swimming lessons from a shark. its hilarious how that shit still works on people. lets all go learn about how cigarettes are safe from tobacco companies, how index funds are superior to all other investments from Vanguard, tricks to finance your car from a dealership, how social media "connects people" from Facebook and so on.
as an immigrant it was clear to me how deeply ingrained marketing is in the culture early on and how dangerous it is to let those people shape your opinions. that basic understanding of how marketing/"submarine" PR is pervasive and how their interests are usually NOT aligned with yours just seems lost on too many people. like marketing has long since gone beyond a simple ad and now teaches entire frameworks to see the world through, frameworks that may be very dangerous to you. i feel like immigrants generally understand this - almost anyone who you don't know, who teaches you anything for free and is trying to nudge you towards a product or seems too promotional is probably a rat-bastard liar on some level. there are very very few exceptions like Khan Academy, online college courses etc. at the least if you don't understand someone's incentives, you should be wary.
if your parents don't teach you that, and the media is owned by those same marketing fuckers, and you don't luck into a book or TV show that teaches you that or see what real education is, its hard.. i think the first step is for people to take back control of "common knowledge". you and ordinary people around you should have an oral culture of trusted knowledge, that parents and children understand is more truthy and in your best interest than whatever trash is on the news. oral cultures cannot be taken over by marketers.
as an immigrant it was clear to me how deeply ingrained marketing is in the culture early on and how dangerous it is to let those people shape your opinions. that basic understanding of how marketing/"submarine" PR is pervasive and how their interests are usually NOT aligned with yours just seems lost on too many people. like marketing has long since gone beyond a simple ad and now teaches entire frameworks to see the world through, frameworks that may be very dangerous to you. i feel like immigrants generally understand this - almost anyone who you don't know, who teaches you anything for free and is trying to nudge you towards a product or seems too promotional is probably a rat-bastard liar on some level. there are very very few exceptions like Khan Academy, online college courses etc. at the least if you don't understand someone's incentives, you should be wary.
if your parents don't teach you that, and the media is owned by those same marketing fuckers, and you don't luck into a book or TV show that teaches you that or see what real education is, its hard.. i think the first step is for people to take back control of "common knowledge". you and ordinary people around you should have an oral culture of trusted knowledge, that parents and children understand is more truthy and in your best interest than whatever trash is on the news. oral cultures cannot be taken over by marketers.
To be fair to Robinhood (I know..), "time in the market beats timing the market" has been a maxim some believe since they were trading paper in the street. The debate over the better strategy hasn't to my knowledge been settled yet.
I do.
> A 2014 meta-analysis of 169 papers and 201 studies, however, found that "interventions to improve financial literacy explain only 0.1% of the variance in financial behaviors studied" — and that low-income students had even weaker correlations.
That's because only two kids in a class of 40-ish were paying attention. It's the same two kids who were paying attention in science, math, literature, history, etc. That asinine argument can be made about education itself. Nobody is paying attention and actively prides themselves in not learning and never reading a book in their lives, that's the problem. That doesn't mean it "doesn't work", and that you should short change the students that actually want to participate.
It certainly helped me get out of poverty. The only people I've ever heard argue against this (until now) were people who actively wanted me to fail in life because they couldn't imagine themselves understanding it ever since they were already financially illiterate adults.
I took the lessons and the beatings so that I wouldn't have to continue taking the beatings later in life. The small fraction of students that you end up teaching actually do appreciate it.